We have issued an updated research report on Tetra Tech Inc.TTEK on Dec 15, 2015. Lately, the company has been riding high on winning new government contracts. Moreover portfolio development is also in the cards.
During the last three months, Tetra Tech has won several contracts. This includes a $600 million global indefinite delivery, indefinite quantity ('IDIQ') contract from the U.S. Agency for International Development ('USAID'); an IDIQ contract from the U.S. Air Force for providing architectural-engineering services on a global scale; and a five-year single-award task order worth $46 million from the USAID.
Apart from this, Tetra Tech continuously evaluates the market for strategic acquisition opportunities. Driven by increased organic and acquisitive investments, the company expects its revenues to increase modestly in the future. In October 2015, Tetra Tech penned an acquisition deal to buy leading consulting and engineering firm Coffey International based in Sydney. Tetra Tech expects to strengthen its current service offerings by relying on Coffey's solid expertise in international development and geoservices or geotechnical engineering.
However, unfavorable currency translations, softness in the mining business and volatility in oil & gas prices continue to bother Tetra Tech's financials. Also, the company's heavy dependency on the U.S. federal, state and local government agencies renders it vulnerable to unfavorable budgetary cuts. This apart, the cyclical nature of the key markets served by the company add to its woes.
Apart from this, although the company's plan to exit its RCM segment holds good for the long term, the related expenses may drag down its near-term results. Moreover, the company currently has significant backlog level in the RCM segment, which has to be completed before the winddown of the segment. Any failure in completing these backlogs may result in huge losses in revenues and margins of Tetra Tech.
Over the last 7 days, the Zacks Consensus Estimate for fiscal 2016 earnings per share dipped by 1.1% to $1.83. Consequently, Tetra Tech currently carries a Zacks Rank #4 (Sell).
Other Stocks to Consider
Better-ranked stocks in the same sector include LiqTech International, Inc. LIQT , Energy Recovery, Inc. ERII and Perma-Fix Environmental Services Inc. PESI . While LiqTech International carries a Zacks Rank #1 (Strong Buy), Energy Recovery and Perma-Fix Environmental Services hold a Zacks Rank #2 (Buy).